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Robin Hahnel Interview on Participatory Economics – Part 3 – Worker Councils, Efficiency, Labour Cost, Automation

Editor’s note: discussion topics include what production targets for individual production units benefit society as a whole the most in a Participatory Economy (parecon), how to calculate the cost of labour in parecon, how to determine pay for workers in parecon, the role of automation in parecon, unemployment in planned economies vs. market economies, and whether parecon is incentive compatible with efficient use of automation.

[After the Oligarchy] Hello everybody, this is After the Oligarchy. Today I’m speaking with Professor Robin Hahnel.

Robin Hahnel is a professor of economics in the United States, co-founder with Michael Albert of the post-capitalist model known as Participatory Economics (Parecon), and author of many books.

Today’s conversation is in association with meta: the Centre for Post-capitalist Civilization. This is the first in a series of interviews with Professor Hahnel about Participatory Economics, and in particular his latest book Democratic Economic Planning published in 2021. If you haven’t watched the first interview check out Part A and Part B here.

It’s an advanced discussion of the model proposed in that book so I recommend you familiarize yourself with participatory economics to understand what we’re talking about. You can do that by visiting participatoryeconomy.org. You can also read Of the People, By the People for a concise introduction to parecon.

The discussion will also continue on the forum of participatoryeconomy.org.

Robin Hahnel thank you very much for joining me.

[Robin Hahnel] Great to be with you. [Music]

[ATO] We were talking about worker self-management there at length, and there’s been a lot of talk of social cost and social benefit, and production proposals, and how the social interest is factored into the formulation and revision of production of proposals through this calculation of social benefit and social cost.

So, let’s dive into that with this question, and the question is: you made the point that if a workers council makes a proposal, as long as the social benefit that is produced by that proposal, and calculated, is at least equal to the social cost of that proposal – for the labour, the different resources, the capital goods, the pollution it generates, and so on – if those are at least equal, at parity, then at least people are no worse off because of it, right? And so the question is: are worker councils always aiming for social benefit divided by social costs is equal to one (SB/SC = 1)? Surely there is no progress unless the social benefit is greater than the social cost, in the long run, say. Would it not be desirable if the aim was for the social benefit to be much greater than the social cost? Representing getting much more out of much less. And if so, what will drive worker councils to achieve this? So it’s two questions there.

[RH] My answer is going to be very economics-y, okay?

[ATO] Sure.

[RH] And when you sent me these questions in advance, and when I looked at this series of questions, I realized ‘oh my god’.

When we teach economics classes and we teach ‘well, how would a profit-maximizing firm decide whether to use more of some input?’, what we say is, well, if when we use more of the input the increase in revenues is higher than the increase in costs, then the firm will keep doing it. And we come up with this rule which basically says a profit-maximizing firm is going to keep using every input right up to the point where the last unit that it used generated an increase in revenue that was exactly equal to the increase in cost.

And then the students will eventually ask me – some bright student in the class at some point will raise their hand and say – ‘well then why did the firm use that last unit?’. And my answer is we don’t really care if it used the last unit. It’s just a little thought experiment so that we can show that it wants to use every unit that generates a little more in revenues than it does in cost. It doesn’t want to use any units that would increase cost more than revenues.

And what you’re asking me is: that marginal unit should I use it or not? And what I’m saying is that’s not the point. So, part of my answer to your question is: when we say that we want workers councils to keep doing what they’re doing right up to the point where the social benefits equal to social costs, it is the same kind of reasoning. What if the social benefits were still greater than the social costs of doing something? Well then we should want that council to keep doing more of it. Whether it does the last little bit isn’t really the point.

Now here’s the second place where things are going to get a little economics-y. One of my criticisms of the usual teaching of microeconomic theory about capitalism is that that’s actually not what profit-maximizing firms do.

[ATO] Yes, yes, yes, yes.

[RH] And they don’t do that because if you keep buying units all the way up to the point where the increase in revenues that comes from it is no bigger than the increase in cost, you haven’t earned any profit on that last unit. And what profit-maximizing firms actually do is they basically have an expected rate of profit. So they’re not going to keep using inputs unless … They’re going to stop whenever the increase in revenues is not only as large as the increase in cost but it’s a little bit more. That gives them that standard rate of profit that they’re insisting on.

And this has been one of the things I’ve always loved about Sraffian economic theory compared to mainstream neoclassical economic theory. Sraffian economic theory basically says: look, in economies there’s a going rate of profit, and that’s rather arbitrary; when the workers’ bargaining power is high, the standard rate of profit will be low; when capitalist bargaining power is high, the standard rate of profit will be high; but there will be some standard rate of profit and firms take that into account.

And so, in a sense, you’re also asking me that. And the answer is again going to be a little economics-y and complicated.

Paul Cockshott Interview on Towards a New Socialism – Part 3 – Differential Pay & Worker Self-Management

Editor’s note: discussion topics include how to handle differential pay in the Towards a New Socialism model (TNS), and whether TNS can fulfill aspirations for worker self-management.

[After The Oligarchy] Hello everybody, this is After the Oligarchy speaking to Dr. Paul Cockshott again. Paul Cockshott is a computer engineer working on computer design and teaching computer science at universities in Scotland. Named on 52 patents, his research covers robotics, computer parallelism, 3D TV, foundations of computability, and data compression. His books include Towards a New Socialism, How the World Works, Classical Econophysics, and Computation and Its Limits.

Today’s conversation is in association with meta: the Centre for Post-Capitalist Civilization. This is the third in a series of interviews with Dr. Cockshott about Towards a New Socialism. Watch the first and second interview if you haven’t already.

In Towards a New Socialism, published by Paul Cockshott and Allin Cottrell in 1993, the authors present a bold vision of a democratically planned economy using computerized labour time. In this interview we’ll be discussing some more advanced questions about that model, so I recommend you read the book to really understand what we’re talking about.

You can watch some excellent videos on Dr. Cockshott’s YouTube channel.

Dr. Paul Cockshott thank you very much for joining me again.

[Paul Cockshott] Hi.

[AO] Let’s start off with a question about standardized pay grades. So, in Towards a New Socialism you write that ‘the planners would know for instance that a given project requiring 1000 person hours of average labour would only require, say, 800 person hours of grade a labour’ – how would the planners figure this out?

The context for people watching is that in TNS people are paid according to the number of hours that they work. But it’s the idea that there might be pay grades according to how strenuously people want to work, and there might be, say, tier A, tier B, and tier C. So, how would the planners figure out these pay grades?

[PC] It has to be done in terms of physical or realized productivity of individual people. Some people can just work faster than others. However, this is not a property of a trade or profession. It’s not that some trades or professions are higher grade than others, it’s a difference in productivity within any trade. Some people are just faster workers in a trade.

Now, for planning purposes it’s unlikely this would be relevant except in very special circumstances, where for some reason the number of people that could be employed on the project was limited and the project was of high priority and therefore within each trade that was going to be involved they might want to have the best workers working on it. If it was some project of major national importance and you couldn’t just assign more workers to it, then under those circumstances, and they’re very limited circumstances, it might be worth planners knowing these things.

But they would be exceptional really, because in most circumstances, within any work team, you’ll get some people who are more productive and some people who are less productive. And Marx says that once you get around twelve – I think he says it is – in a work team the difference is evened out and work teams above a certain size all count just as average labour. So for it to be significant you’re talking about a circumstance where you you’ve got a small number of people where they can’t add more to them and they need to be highly productive. Like astronauts going to the moon or something like that.

[AO] Is there not another dimension as well to this, in terms of motivational efficiency? There’s a discussion in the book that perhaps it might be required to pay people slightly differently depending on how hard they want to work.

Well it depends on what the method of pay or measuring work is. If you are in some branch of labour where the work can be physically measured in some way, and you can then establish a norm what the average is, then people would get paid more if they exceed the norm, paid less if they fall short of the norm. And this this was standard practice in socialist countries where they had what they called payment according to labour.

I mean I was surprised, I remember, in the late 70s, early 80s, to be visiting Bulgaria and finding that university lecturers were paid according to norms where they got a higher rate of pay according to how many pages of lecture notes they prepared and things like that. Areas which here are not graded in terms of productivity can be graded in terms of productivity, which is not the same thing as what’s done here where people are paid for seniority, prestige, etc.

It was based on actual measured outputs so if it’s reckoned that in a 40-hour week someone can, the average person can, do a certain amount, if somebody is able to do 10 percent more than that in a 40-hour week and another person 10 percent less, then provided across the work team averages out there’s no reason why the person who’s more productive can’t be credited with more and the person who’s less productive can’t be credited with less.

But since what you are trying to measure is two objective things, actual productivity and human time, you have to have a proper conservation principle of human time. You can’t start paying more than the actual number of hours that everyone worked. And since it’s a relative measure of productivity in a particular trade, in a particular branch of that trade, then it has to be something that’s decided by the people collectively in the group that are undertaking the task. that some people are doing more than their fair share and should be rewarded.

But that does depend on it being agreed collectively. And it does depend on the average adding up because you can’t have a situation where your calculation becomes detached from reality. You don’t want to have an inflation of the notional labour credit so that more labour credits are being handed out than actual hours that are working being worked.